Opinion
No. CV 09 6001296
September 16, 2010
MEMORANDUM OF DECISION RE MOTION TO STRIKE SPECIAL DEFENSES AND COUNTERCLAIM [#114]
The plaintiff, GMAC Mortgage, LLC (GMAC) filed a motion to strike the substituted special defenses and counterclaim of the defendant, 2221 Avenue U Realty, LLC (defendant LLC), dated May 21, 2010, pursuant to Practice Book § 10-39. GMAC also filed a memorandum of law in support of its motion. The defendant LLC objected to the motion by pleading dated July 8, 2010, together with its memorandum of law. The court heard argument on the motion at short calendar on July 26, 2010.
BACKGROUND
GMAC commenced the present foreclosure action against the defendant LLC by virtue of a writ, summons and complaint dated August 11, 2009, with a return date of September 1, 2009. GMAC alleges in its complaint that the defendant, Chaim Tornheim, executed a note dated May 15, 2007, pursuant to which Tornheim became obligated to repay GMAC the original principal amount of $198,900, together with interest and all costs of collection as set forth in the terms of the note and mortgage.
To secure the note, Tornheim executed and delivered to Mortgage Electronic Registration Systems, Inc., as nominee for GMAC, a mortgage on a certain piece or parcel of land, together with the improvements thereon, known as 27 West Avenue, Norwich, Connecticut (the property). Said mortgage was dated May 15, 2007, and recorded June 14, 2007, in Volume 2392 at Page 144 of the Norwich Land Records. In its five-count complaint, GMAC alleges, respectively, foreclosure, equitable mortgage, reformation, unjust enrichment and mistake, as title to the subject property was discovered to be held in the name of the defendant LLC upon performing the title search in preparation for the commencement of the present action.
On November 6, 2009, the defendant LLC filed an answer, special defenses and counterclaim against GMAC. GMAC filed a motion strike the defendant LLC's special defenses and counterclaim on December 3, 2009, which this court, Devine, J., granted on March 24, 2010.
On April 8, 2010, the defendant LLC filed substitute special defenses and counterclaim against GMAC. GMAC now moves to strike the defendant LLC's substitute special defenses and counterclaim.
APPLICABLE LAW
"Pursuant to Practice Book § 10-39(a)(5), when a party seeks to contest the legal sufficiency of any answer to any complaint, counterclaim or cross complaint, or any part of that answer including any special defense contained therein, the party may do so by filing a motion to strike the contested pleading or part thereof . . . [A] counterclaim is a cause of action existing in favor of the defendant against the plaintiff and on which the defendant might have secured affirmative relief had he sued the plaintiff in a separate action . . . A motion to strike tests the legal sufficiency of a cause of action and may properly be used to challenge the sufficiency of a counterclaim." (Citation omitted; internal quotation marks omitted.) JP Morgan Chase Bank, Trustee v. Rodrigues, 109 Conn.App. 125, 130-31, 952 A.2d 56 (2008). "It is fundamental that in determining the sufficiency of a complaint challenged by a . . . motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). In ruling on a motion to strike, "[t]he role of the trial court [is] to examine the [pleading], construed in favor of the [defendant], to determine whether the [defendant has] stated a legally sufficient [special defense or counterclaim]." (Internal quotation marks omitted.) Dodd v. Middlesex Mutual Assurance Co., 242 Conn. 375, 378, 698 A.2d 859 (1997).
FIRST SPECIAL DEFENSE
The defendant LLC's first special defense alleges in relevant part: "The [defendant LLC] did not apply for the loan from [GMAC], and never intended to be a party to the [n]ote and [m]ortgage with [GMAC]; nor did [the defendant LLC] ever intend to establish title in [Tornheim]; and the [defendant LLC] did not sign the [m]ortgage and received no benefit from the [h]ome [e]quity [l]ine of [c]redit proceeds which were paid directly to [Tornheim]. [Tornheim] has never been the owner of the [p]roperty and had no legal capacity or standing, on his own behalf or on behalf of the [defendant] LLC, to deliver a [m]ortgage to [GMAC]. Following the closing and upon receipt of the recorded documents, [GMAC] knew or should have known that [Tornheim] did not own the property at the time the [m]ortgage was signed and that he had no capacity to convey a mortgage interest to [GMAC]. Despite the fact that it knew or should have known that the [defendant] LLC was still the record title owner to the property, [GMAC] failed to give the [d]efendant LLC any notice that a mortgage was recorded against the property until the time of foreclosure." As a result, the defendant LLC alleges that GMAC's note and mortgage deed violate the statute of frauds, General Statutes § 52-550, and General Statutes § 47-5.
GMAC first argues that the defendant LLC's first special defense should be stricken on the grounds that the allegations in the special defense are inconsistent with GMAC's allegations in its complaint claiming that a quitclaim deed of the property from the defendant LLC to Tornheim was prepared, but not recorded. The defendant LLC counters that the allegations in the first special defense are not inconsistent with the allegations in the complaint because the defendant LLC has alleged that any purported execution of a quitclaim deed by Tornheim on behalf of the defendant LLC was a fraud.
"The purpose of a special defense is to plead facts that are consistent with the allegations of a complaint but demonstrate, nonetheless, that the plaintiff has no cause of action." (Internal quotation marks omitted.) Danbury v. Dana Investment Corp., 249 Conn. 1, 17, 730 A.2d 1128 (1999); see also Practice Book § 10-50. Reading the first special defense in a light most favorable to the defendant LLC, the defendant LLC's allegations that it did not sign a note and mortgage with GMAC is not in direct conflict with the allegations set forth in the complaint. As a result, GMAC's motion to strike the defendant LLC's first special defense on these grounds must be denied.
GMAC further argues that the defendant LLC's first special defense should be stricken on the grounds that the defendant LLC fails to sufficiently allege a claim under § 52-550 or § 47-5. The defendant LLC counters that the facts alleged in its first special defense indicate that no relevant writing exists that was signed by the defendant LLC.
"In this state, mortgages are conveyances of legal title to land. See State v. Hahn, 207 Conn. 555, 562, 541 A.2d 499 (1988); Family Financial Service, Inc. v. Spencer, 41 Conn.App. 754, 761, 677 A.2d 479 (1996). Therefore, they are subject to the statutes that apply to such transactions." Mortgage Electronics Registration Systems, Inc. v. Liskiewicz, Superior Court, judicial district of Bridgeport, Docket No. CV 04 0409667 (September 26, 2006, Rodriguez, J.). "General Statutes § 47-5 sets out formal requirements for conveyances of real property." Treglia v. Zanesky, 67 Conn.App. 447, 449, 788 A.2d 1263 (2001), cert. denied, 259 Conn. 926, 793 A.2d 252 (2002).
Section 47-5 provides in relevant part: "All conveyances of land shall be: (1) In writing; (2) if the grantor is a natural person, subscribed . . . by the grantor with his own hand.(3) acknowledged by the grantor . . . to be his free act and deed; and (4) attested to by two witnesses with their own hands." The statute of frauds, which is codified at General Statutes § 52-550, provides in relevant part: "No civil action may be maintained in the following cases unless the agreement, or a memorandum of the agreement, is made in writing and signed by the party, or the agent of the party, to be charged . . . (4) upon any agreement for the sale of real property or any interest in or concerning real property . . ." Our Supreme Court has long recognized that "the statute of frauds is satisfied [only] by the signature to the contract of the party sought to be charged . . ." Hodges v. Kowing, 58 Conn. 12, 19, 18 A.979 (1889).
In the present case, the agreement at issue involves a conveyance of land, and therefore, must meet the requirements of § 52-550 and § 47-5. The defendant LLC's first special defense alleges that the written agreements in this case, the note and mortgage, were not signed by the defendant LLC, the party being charged in this foreclosure action. Therefore, construing the allegations in the defendant LLC's favor, the defendant LLC's claim that the written agreements at issue fails to satisfy the signature requirements under the statute of frauds constitutes a legally sufficient special defense. As a result, GMAC's motion to strike the defendant LLC's first special defense on these grounds must also be denied.
CT Page 18418
SECOND SPECIAL DEFENSE
The defendant LLC's second special defense incorporates the relevant allegations of the first special defense, and further alleges that "[t]he allegations in [GMAC's] complaint [fail] for lack of consideration as the documents and facts unambiguously indicate that the parties did not intend that [the defendant LLC] be a party to the [m]ortgage deed or the [n]ote." GMAC argues that the defendant's second special defense should be stricken on the grounds that the defense is conclusory and inconsistent with the allegations set forth in the complaint. The defendant LLC counters that its second special defense is legally sufficient in light of the relevant circumstances in the present case."To be enforceable, a contract must be supported by valuable consideration . . . The doctrine of consideration is fundamental in the law of contracts, the general rule being that in the absence of consideration an executory promise is unenforceable." (Citation omitted; internal quotation marks omitted.) Connecticut National Bank v. Voog, 233 Conn. 352, 366, 659 A.2d 172 (1995). "The general rule is that, in the absence of fraud or other unconscionable circumstances, a contract will not be rendered unenforceable at the behest of one of the contracting parties merely because of an inadequacy of consideration." (Emphasis added; internal quotation marks omitted.) Christian v. Gouldin, 72 Conn.App. 14, 23, 804 A.2d 865 (2002).
In the present case, the defendant LLC alleges in its second special defense that it was not a party to the note and mortgage with GMAC. The defendant LLC's second special defense further alleges that GMAC knew or should have known that Tornheim did not own the property when the note and mortgage were signed, and that Tornheim had no capacity to convey a mortgage interest to GMAC. Thus, construing the allegations in the defendant LLC's favor, the defendant LLC has alleged the existence of fraudulent and unconscionable circumstances surrounding the agreement at issue, and as a result, has made sufficient allegations to support a defense for a lack of consideration. Therefore, GMAC's motion to strike the defendant LLC's second special defense on these grounds must be denied.
GMAC cites First National Bank v. Ross, 29 Conn.App. 667, 617 A.2d 909 (1992), which it alleges constitutes an analogous case to this matter, for the proposition that an allegation of fraud does not bar GMAC, as mortgagee, from foreclosing on all parties' interests in the property, including that of the defendant LLC. First National Bank, however, is inapplicable to the present case, as it involves an alleged fraud between a husband and wife, wherein the wife had an opportunity to both read and sign the relevant documents. The defendant LLC in the present case alleges that it did not have an opportunity to either read or sign the note and mortgage. As a result, the court finds that the Appellate Court's decision in First National Bank v. Ross, supra, 29 Conn.App. 667 does not render the defendant's second special defense legally insufficient.
COUNTERCLAIM First Count CT Page 18419
The first count of the defendant LLC's counterclaim incorporates the relevant allegations of the first special defense, and further alleges that "[GMAC's] actions have resulted in an encumbrance and cloud on [the defendant LLC's] title to the property which diminish the value of the property," and as a result, the defendant LLC "has suffered special damages in the form of time and [a]ttorney fees it must incur to defend this litigation . . ." GMAC argues that the first count of the defendant LLC's counterclaim should be stricken on the grounds that the defendant LLC has failed to sufficiently allege the necessary elements for a slander of title claim, namely the elements of malice and the intent of the party encumbering the land to diminish the value of the property through the use of any utterance or false statement. The defendant LLC counters that it has alleged sufficient facts to support a claim for slander of title."A cause of action for slander of title consists of the uttering or publication of a false statement derogatory to the plaintiff's title, with malice, causing special damages as a result of diminished value of the . . . property in the eyes of third parties. The publication must be false, and the plaintiff must have an estate or interest in the property slandered. Pecuniary damages must be shown in order to prevail on such a claim." (Internal quotation marks omitted.) Gilbert v. Beaver Dam Assn. of Stratford, Inc., 85 Conn.App. 663, 672-73, 858 A.2d 860, cert. denied, 272 Conn. 912, 866 A.2d 1283 (2004). "Acting with malice has been defined by our courts as with the knowledge that [the statement was] false or with a reckless disregard of the truth or falsity of the facts stated." (Internal quotation marks omitted.) R.A. Villanova Co., Inc. v. Chatfield, Superior Court, judicial district of Waterbury, Docket No. CV 04 01827023 (February 8, 2005, Agati, J.).
In the present case, the defendant LLC alleges in the first count of its counterclaim that GMAC knew or should have known that Tornheim did not own the property at the time the mortgage was signed, and that Tornheim had no capacity to convey a mortgage interest to GMAC. The first count of the defendant LLC's counterclaim further alleges that despite the fact that it knew or should have known that the defendant LLC was still the record title owner of the property, GMAC failed to give the defendant LLC any notice that a mortgage was recorded against the property until the property was foreclosed upon, and caused a lis pendens to be recorded on the property. Viewing the allegations in the defendant LLC's favor, the court finds that the defendant LLC has alleged that GMAC acted with either the knowledge or reckless disregard of the illegitimacy of the note and mortgage, and as a result, the defendant LLC has sufficiently alleged the requisite elements for a slander of title claim. Therefore, GMAC's motion to strike the first count of the defendant LLC's counterclaim on these grounds must be denied.
Second Count
The second count of the defendant LLC's counterclaim incorporates the allegations set forth in the first count of the counterclaim, and further alleges that "[GMAC's] actions as alleged in the [f]irst and [s]econd [d]efenses and [the first count of the counterclaim] are unfair and deceptive in violation of the Connecticut Unfair Trade Practice[s] Act [(CUTPA), General Statutes § 42-110a et seq.] . . . for which [the defendant LLC] has sustained an ascertainable loss." GMAC argues that the defendant LLC has failed to sufficiently allege a claim under CUTPA. The defendant LLC counters that a mortgage lender's foreclosure upon a mortgage in which the mortgagor had no ownership interest in the property or authority to convey a mortgage, without the exercise of due diligence, constitutes an actual deceptive practice and violation of public policy.
"It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [competitors or other businessmen] . . .
"All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy . . . Furthermore, a party need not prove an intent to deceive to prevail under CUTPA." (Internal quotation marks omitted.) Eller v. Beckenstein, 117 Conn.App. 550, 565-66, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009). In the present case, viewing the totality of the defendant LLC's allegations in its favor, the court finds that the defendant LLC has sufficiently alleged facts to support a defense under CUTPA. As a result, GMAC's motion to strike the second count of the defendant LLC's counterclaim on these grounds must be denied.
ORDER
For the foregoing reasons, the court hereby denies GMAC's motion to strike the defendant LLC's special defenses and counterclaim.